141
THE CENTRAL BANK OF KENYA ACT, 1966
No. 15 of 1966
Date of Assent: 24th March 1966
Date of Commencement: By Notice
ARRANGEMENT OF SECTIONS
PART I-PRELIMINARY
Section
1--5hort title and commencement.
2-Interpretation.
PART II-ESTABLISHMENT, CONSTIroTION AND OBJBCTS
3-Establishment of Bank and legal status.
4-Objects of the Bank.
S-Head office and branches.
6-Agents.
7-Exemption from tax.
PART III-CAPITAL AND RESERVES
8-Authorized capital of the Bank.
9-General Reserve Fund.
PART IV-MANAGEMENT
lO-Board of Directors.
11-Constitution of the Board.
12-Meetings of the Board.
13-Govemor.
14-General disqualifications for all Board members.
IS-Special disqualifications for Governor and Deputy Governor.
16-Remuneration.
17-Preservation of secrecy.
I8-Declaration of interest.
PART V-CURRBNCY
19-Currency of Kenya.
2o-Par value.
21-Use of Kenya shilling.
22-Issue of notes and coins, legal tender, and withdrawal.
23-Exchange of East African Currency Board notes and coins.
24-Exchange of mutilated notes and coins.
2S-BilIs of exchange, promissory notes, etc.
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ARRANGEMENT OF SECTIONs-(Contd.)
PART VI-EXTERNAL RELATIONS
Section
26-Reserve of external assets.
27-Dealings in gold and foreign exchange.
28-Institutions with which Bank may deal in foreign exchange.
29-Relations with foreign central banks, foreign banks and foreign
financial institutions.
\
3Q-Exchange control.
31-Payments agreements.
32-Fiscal agent for Government's transactions with international
financial institutions.
33-Depository.
PART VII-RELATIONS WITH SPECIFIED BANKS
34-Banker to specified banks.
35-Rediscounts.
36-Loans.
37--Conditions for credit transactions.
38-Reserve requirements.
39-Regulation of interest rates of specified banks or specified
financial institutions.
4O-Credit controls over specified banks.
41 -Credit controls over specified financial institutions.
42-Bank to be consulted in licensing, etc., of banking businesses.
43-Information to be furnished by specified banks, etc.
PART VIII-RELATIONS WITH PUBLIC ENTITIES
44-Fiscal agent and banker to public entities.
45-Functions as fiscal agent.
46-Direct advances to the Government.
47-Credit operations with Government securities.
48-Limit on lending to the Government.
49-Prohibition of other credit to public entities.
50-Adviser to the Government.
PART IX-MISCELLANEOUS PROVISIONS
51--Revaluation profits.
52-Prohibited operations.
53-Financial year.
54-Annual reports.
55-Publication of reports, etc.
56-Audit by Controller and Auditor-General.
57-Amendment of laws.
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ARRANGEMENT OF
No. IS
SECTlONs--(Contd.)
PART X-TRANSITIONAL PROVISIONS
Section
58~Repeal Cap. 417, oj.c. Group 17.
59-Taking over assets of East African Currency Board.
60-Exclusion of fiduciary issue from the limits on Government
credit.
61-Preliminary acts and expenses.
SCHEDULE
An Act of Parliament to establish the Central Bank of Kenya
and to provide for the operation thereof; to establish the
C&rreDCY of Kenya aDd for matten connected therewith
and related thereto
ENACTED by the Parliament of Kenya as follows:PART I-PRELIMINARY
1. This Act may be cited as the Central Bank of Kenya
Act. 1966 and shall come into operation on such day as the
Minister may by notice in the Gazette appoint:
Provided that the Minister may, by the same or different
notices in the Gazette, appoint different days on which any
of the provisions of this Act shall come into operation.
Short title and
commencement.
2. In this Act, unless the context otherwise requires"the Bank" means the Central Bank of Kenya (or the
Banki Kuu ya Kenya) established under section 3 of this Act;
"Boardn means the Board of Directors of the Bank
appointed under Part IV of this Act;
"convertible" in relation to any exchange means
exchange which is freely negotiable and transferable in international exchange markets at exchange rate margins
consistent with the Articles of Agreement of the International
Monetary Fund;
"Minister~' means the Minister for the time being
responsible for finance;
"public entity" means the Government. the Organization,
the Authority, any local authority, ,or any public body
specified by the Minister. on the recommendation of 'the.
Bank, as a public entity for the purpdses: of this '~ct;·
Inlerpretation
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Cap. 488.
Central Bank of Kenya
1966
"shilling" means a Kenya shilling as provided in section
19 of this Act. or a shilling issued by the East African
Currency Board for so long as it is legal tender in Kenya in
accordance with this Act;
"specified bank" means any licensed bank within the
meaning of such expression in the Banking Act which is
specified by the Bank for the purposes of this Act;
"specified financial institution" means any financial
institution specified by the Bank for the purposes of this Act.
PART II-ESTABLISHMENT. CONSTITUTION AND OBJECTS
Establishment
of Bank and
legal status.
3. (I) There is hereby established a bank which shall be
known as the Central Bank of Kenya and which shall also be
known by the alternative corporate name of the Banki Kuu
ya Kenya.
(2) The Bank shall be a body corporate with perpetual
succession and a common seal. with power to acquire~ own ~
possess and dispose of property. to contract, and to sue and
to be sued in its own name.
(3) The Bank shall exercise any type of central banking
function unless specifically excluded under this Act, and shall
enjoy all the prerogatives of a central bank.
(4) The Bank may make its own rules of conduct or
procedure. not inconsistent with the provisions of this Act,
for the good order and proper management of the Bank.
Cap. 486.
Cap. 488.
(5) The Bank shall not be subject to the provisions of
the Companies Act or the Banking Act.
Objects of
the Bank.
4. The principal objects of the Bank shall be to
regulate the issue of notes and coins. to assist in the develop.
ment and maintenance of a sound monetary. credit and
banking system in Kenya conducive to the orderly and
balanced economic development of the country and the
external stability of the currency~ and to serve as banker and
financial adviser to the Government.
Head office
and branches.
5.
(1) The Bank shall have its head office in Nairobi:
Provided that during a time of national emergency the
Bank may, unless the President otherwise directs, establish
its head office temporarily or permanently in' any other place
within Kenya or 'elsewhere.
'
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No. IS
(2) (a) The Bank may establish or close branches in any
place wi thin Kenya.
(b) The Bank may, with the prior approval of the
Minister, open or close branches outside Kenya.
6. The Bank may. with the prior approval of the
Minister, appoint, on such terms as it considers appropriate,
or cancel the appointment of, agents, both within and outside
Kenya.
Agents.
7. 0) The Bank shall not be liable to any taxation
imposed by any law in respect of income or profits.
Exemption
from tax.
(2) No duty shall be chargeable under the Stamp Duty
Act in respect of any instrument executed by or on behalf of
or in favour of the Bank in any case where, but for this
exemption. the Bank would be liable to pay such duty.
Cap. 480.
(3) The Minister may, whether for the purpose of
removing any doubt as to the extent of the foregoing
provisions of this section or for the purpose of extending the
immunities of the Bank, by order published in the Gazette
specify any tax, duty, fee, rate, levy. cess or other impost
as one to which the Bank shall not be liable. and the law
relating thereto shall have effect accordingly.
(4) This section shall have effect notwithstanding anything contained in any Act of the East African Common
Services Organization.
PART lII--CAPITAL AND RESERVES
8. (1) The authorized capital of the Bank shall be
twenty-six million shillings wnich shall be paid up as a charge
on and issued out of the Consolidated Fund as the Minister
shall. at the request of the Bank, from time to time direct.
Authorized
capital of
the Bank.
(2) The ownership of the entire paid up capital of the
Bank shall be vested in the Permanent Secretary to the
Treasury.
9. (1) The Bank shall establish and maintain a fur.d
designated as the General Reserve Fund to which shall be
transferred at the end of each financial year, if the sums
standing to the 'credit of the General Reserve Fund at the
end of that year are less than the authorized capital of the
Bank. one quarter of the net annual profits 'of the, Bank
General
Reserve
Fund.
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Central Bank 0/ Kenya
1966
after allowing for the expenses of operation and after
provision has been made for bad and doubtful debts.
depreciation in assets, contributions to staff benefit funds. and
such other contingencies and accounting provisions as the
Bank deems appropriate.
(2) Subject to subsection (1) of this section the net
annual profits of the Bank~ ca1cu1ated in accordance with
that subsection. shall be paid into the Consolidated Fund.
(3) The amount of any net losses of the Bank in any
financial year which is in excess of the sums standing to the
credit of the general reserve fund of the Bank shall be
charged upon and paid out of the Consolidated Fund without further appropriation than this Act.
PART IV~MANAGEMENT
Board of
Directors.
Constitution
of the Board.
10. There shall be a Board of Directors of the Bank,
constituted as provided in section 11 of this Act~ which shall~
subject to the provisions of this Act. be responsible for
determining the policy of the Bank.
11. (I) The Board shall consist of(a) a Governor;
(b) a Deputy Governor;
(c) the Permanent Secretary to the Treasury, or, in his
absence an official of the Treasury nominated by
the Minister (hereinafter referred to as the
representative of the Treasury); and
(d) four Directors.
(2) The Governor and the Deputy Governor shall be the
Chairman and Deputy Chairman of the Board respectively,
and shall be appointed by the President for terms of four
years each and shall be eligible for reappointment:
Provided that in the case of a person who is not a citizen
of Kenya any such appointment shall be at the pleasure of
the President.
(3) The Directors shall be appointed by the President
for terms of four years and shall be eligible for reappointment:
Provided that with regard to the four Directors first
appointed, the appointments shall be for one. two, three and
four years. respectively'; and
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Provided further that if a Director's appointment on the
Board is terminated before his term of office has expired the
President shall appoint a new Director to serve for the
remainder of that term of office.
(4) Where the Governor, the Deputy Governor or a
Director is unable to perform the functions of his office due
to any temporary incapacity which is likely to be prolonged,
the President may appoint a substitute for that member of the
Board to act with the full powers of that member until such
time as the President determines that the incapacity of that
member has ceased.
12. (1) The Governor, as Chairman of the Board, shall
convene meetings of the Board not less than once in every
two months, or whenever the business of the Bank so
requires. or whenever he is so requested by at least two
Directors, or by the representative of the Treasury.
(2) A quorum for any meeting of the Board shall be the
Governor or the Deputy Governor, the representative of the
Treasury and two Directors.
(3) Decisions of the Board shall be adopted by a
majority of the votes of those present at that meeting, and in
case of an equality of votes the Chairman Or Deputy Chairman presiding at the meeting shall have a second or casting
vote.
(4) The validity of any proceedings of the Board shall
not be affected by any vacancy in the membership of the
Board, or by any defect in the appointment or disqualification
of any member which is discovered subsequent to those
proceedings.
(5) Where the Governor and the representative of the
Treasury consider that, because of exceptional circumstances.
a decision is necessary before a full ,meeting of the Board can
be convened. then that decision may be taken by the
Governor with the concurrence of the representative of the
Treasury and such decision shall be valid and binding on the
Bank. The Governor shall immediately convene a meeting of
the Board and report any such decision to it.
(6) The Governor and the representative of the Treasury
shall each have the· right to suspend a vote by the Board and
refer the matter to the Minister for a decision, and the
Meetings of
the Board.
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Central Bank of Kenya
1966
decision of the Minister as to whether the vote shall stand or
shall not stand shall be binding on the Board.
Governor.
13. (1) The Governor shall be the chief executive
officer of the Bank and, subject to the general policy decisions
of the Board, shall be responsible for the management of the
Bank including the organization, appointment and dismissal
of the staff in accordance with the general terms and
conditions of service established by the Board. The Governor
shall have authority to incur expenditure for the Bank within
the administrative budget approved by the Board.
(2) The Governor shall be the principal representative
of the Bank and shalt in that capacity, have authority(a) to represent the Bank in its relations with other
public entities, persons or bodies;
(b) to represent the Bank, either personally or through
counsel, in any legal proceedings to which the Bank
is a party;
(c) to sign individually or jointly with other persons
contracts concluded by the Bank, notes and
securities issued by the Bank, reports, balance
sheets, and other financial statements, correspondence and other documents of the Bank.
(3) The Deputy Governor shall act for the Governor,
and shall exercise all the powers and shall perform all of the
functions conferred on 1he Governor under this Act whenever the Governor is temporarily absent, and shall perform
such other functions as the Governor may from time to time
assign to him.
(4) The Governor may delegate any of his powers
provided for in this section to other officers of the Bank.
General disqualifications
for an Board
members
14. (1) No person shall be appointed as Governor,
Deputy Governor, or a Director who is(a) a member of the National Assembly;
(b) a salaried employee of any public entity (except on a
secondment basis);
(c) a director, officer, employee, partner in or shareholder of any specified bank or specified financial
institution:
Provided that paragraph (b) above shall not be applicable to the representative of the Treasury; and
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Provided further that the President may in exceptional
cases waive any of the above provisions with respect to any
Director (other than the Governor or Deputy Governor) if
such waiver is in the interests of the Bank and likely to
promote the objects of the Bank under section 4 of this Act.
(2) The President shall terminate the appointment of a
Governor. Deputy Governor, or a Director who(a)
becomes subject to any of the disqualifications
described in subsection (l) of this section~
(b)
is adjudged bankrupt or enters into a composition or
scheme of arrangement with his creditors;
(c)
is convicted of an offence involving dishonesty or
fraud or moral turpitude; or
becomes for any reason incapable of properly
. performing the functions of his office.
(d)
(3) The President shall terminate the appointment of any
Director who absents himself from three consecutive meetings
of the Board without leave of the Board.
IS. (1) The Governor and the Deputy Governor shaH
owe their al1egiance entirely to the Bank and shall not engage
in any paid employment or business or professional activity
outside the duties of their respective offices:
Provided that nothing in this subsection shall prevent
the Governor or Deputy Governor from accepting or holding
any academic office or position in an institution of higher
learning or any advisory position or membership in any
committee or commission with public responsibility, or from
serving in any international financial institution of which
Kenya is a member or with which Kenya is associated, or
any specialized financial institution established by the
Government.
(2) If the Governor or the Deputy Governor engages in
any paid employment or business or professional activity outside the duties of his office contrary to the provisions of
subsection (1) of this section. the President shall terminate
his appointment.
(3) The President may specifically exempt any transactions or activities from the restrictions of this section.
Special dis-
qualifications
for Governor
and Deputy
Governor,
ISO
No. IS
Remuneration.
Central Bank of Kenya
1966
16. (1) The Governor. the Deputy Governor. and any
substitute appointed under section 11 (4) of this Act shall be
paid by the Bank such salaries and allowances as may be
determined from time to time by the President, but such
saJaries and allowances shall not be altered to the detriment
of any person during his term of office.
(2) The Directors and any substitute appointed under
section 11 (4) of this Act shall be paid by the Bank such
allowances as may from time to time be determined by the
President.
Preservation
of secrecy.
17. (I) Except for the purpose of the performance of his
duties or the exercise of his powers, the Governor the
Deputy Governor, any Director, any other officer. or other
employee of the Bank, shall not disclose any information
which he has acquired in the performance of his duties or the
exercise of his powers.
f
(2) Any person who contravenes the provisions of ~ub­
section (I) of this section shall be guilty of an offence and
shall be liable to a fine not exceeding two thousand shi11ings
or to imprisonment for a term not exceeding one year ~ or to
both such fine and imprisonment. in addition to any
disciplinary action which may be taken by the Board.
Declaration
of interest.
18. The Gov~rnor, the Deputy Governor. and any
Director shall declare his interest in any specific proposal
being considered or to be considered by the Board.
PART V--CuRRENCY
Currency of
Kenya.
19. (I) The unit of currency of Kenya shall be the Kenya
shilling which shall be divided into one hundred cents.
(2) Twenty shillings shall equal one Kenya pound.
Par \alue.
20. The par value of the Kenya shilling in terms of
gold shall be determined by the President. acting on the
advice of the Bank and in accordance with any international
agreement in that behalf to which Kenya is a party or with
which it is associated, and shall be notified by notice in the
Gazette.
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11. All monetary obligations or transactions entered
into or made in Kenya shall be deemed to be expressed and
recorded,. and shall be settled,. in Kenya currency unless
otherwise provided for by law or agreed upon between the
parties.
Use of Kenya
shilling.
11. (I) The Bank shall have the sale right to issue notes
and coins in Kenya and,. subject to the provisions of subsection (4) of this section,. only such notes and coins shall
be legal tender in Kenya:
Provided that coins of a denomination of fifty cents shall
be legal tender only for payments up to twenty shillings. and
coins of a denomination of less than fifty cents shall be legal
tender only for payments up to five shillings.
(2) The denominations, inscriptions. form. material and
other characteristics of the notes and coins issued by the
Bank shall be determined by the Minister ~ acting on the
recommendations of the Bank. and shall be notified in the
Gazette and in other media of public information likeJy to
bring them to the attention of the public.
(3) The Bank shall have power to withdraw any notes
or coins issued by the Bank. and the procedure for and effect
of any such withdrawal shall be as follows(a) notice published in the Gazette. and in such other
manner as the Bank considers likely to bring that
notice to the attention of the pUblic. shall specify
the issues. and the denominations fanning part of
such issues. of notes or coins that are to be withdrawn~ the places where those notes or coins may
be taken for exchange~ and the date on which those
notes or coins shall cease to be legal tender;
(b) the notice given under the foregoing paragraph may
provide that. after such period as may be specified
in the notice. the notes or coins to which the notice
applies shall only be exchanged at the head office
of the Bank;
(c) the notes or coins specified in a notice given under
paragraph (a) of this subsection shall be exchanged
at their face value for legal tender at the places and
for the periods (which shall be of reasonable duration) specified in relation to those pJaces in the
notice,. and shall cease to be legal tender on the date
specified in the notice;
Issue of notes
and coins,
legal tender, and
withdrawaL
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1966
the Bank may, by notice published in the same
manner as notice 'Jiven under paragraph (a) of this
subsection, specify a period during which notes or
coins which have ceased to be legal tender may
nevertheless be exchanged at the head office of the
bank, and after which such notes or coins shall no
longer be exchanged.
(4) Notwithstanding the provisions of subsection (1) of
this section, the notes and coins of any issue or denomination
issued by the East African Currency Board shall continue to
be legal tender in Kenya for such time as the Minister may,
on the recommendation of the Bank. determine.
Exchange of
East African
Currency Board
notes and coins.
23. For so long as the East African Currency Board
notes and coins continue to be Jegal tender in Kenya under
section 22 (4) of this Act such notes and coins shall be
exchanged a t par for Kenya currency notes and coins at all
offices of the Bank, and thereafter the Bank shaH continue to
exchange East African Currency Board notes and coins at
par for such further periods as the Bank shall, with the
approval of the Minister, determine and publish in the
Gazette and other media of public information.
Exchange of
mutilated noles
and coins.
24. The Bank. shall not be obliged to exchange any
note or coin which is mutilated, defaced. soiled or otherwise
defective. and the conditions subject to which the Bank may
as a matter of grace exchange any such note or coin shall
be within the absolute discretion of the Bank.
Bills of
exchange,
promissory
notes, etc.
25. (1) The Minister may, if the Bank so recommends,
by regulations published in the Gazette prohibit the issue by
any person other than the Bank of any bill of exchange.
promissory note or similar instrument for the payment of
money to the bearer on demand, and any such regUlations
may make different provision for different cases or classes
of case!> and may impose penalties for any offence under the
regulations of a fine not exceeding ten thousand shillings or
of a term of imprisonment not exceeding two years, or of
both such fine and imprisonment.
(2) Subject to any regulations made under this section
the issue of any such bill. note or instru'ment as is referred to
in the foregoing subsection shall not be deemed to contravene
the s01e right of the Bank to issue notes in Kenya.
IS3
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PART VI-ExTERNAL RELATIONS
26. (1) The Bank shall at all times use its best
endeavours to maintain a reserve of external' assets at
an aggregate amount of not less than the value of four
months imports as recorded and averaged for the last three
preceding years, Subject to subsection (3) of this section such
reserve shall consist of any or all of the following(a) gold;
(b) convertible foreign exchange in the form of(i) demand or time deposits with foreign central
banks or with the Bank's agents or
correspondents outside Kenya:
(ii) documents and instruments customarily used
for the making of payments or transfers in
interna tional transactions;
(iii) notes or coins;
(c) convertible and marketable securities of. or guaran·
teed by, foreign governments or international finan~
cial institutions.
Reserve of
external assets.
(2) The Bank shall from time to time determine the
type and form of convertible foreign exchange and the kinds
of securities which may be held in the reserve of external
assets pursuant to subsection (1) of this section.
(3) The Bank may include in its reserve of external
assets any liquid external asset not included in subsection
(1) of this section, or any readily available international
drawing facility. which the Bank, after consultation with the
International Monetary Fund and with the approval of the
Minister, considers suitable for inclusion in such reserve.
27. (1) The Bank may buy, sell~ import. export, hold or
otherwise deal in gold or foreign exchange under such terms
and conditions as it shall determine: .
Provided that the buying and selling rates involved in
such transactions shall be in accordance with international
agreements to which Kenya is a party~ or with which Kenya
is associated.
(2) The Bank may hold balances, denominated in
foreign currencies, with foreign central banks or with the
Bank's agents of correspondents abroad and, in its discretion~
Dealings in
gold and foreign
exchange.
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Central Bank of Kenya
1966
may invest such balances in marketable short-term foreign
securities denominated in convertible currencies.
Institutions
with which
Bank may ~ea]
in foreign
exchange.
28. The Bank may engage in foreign exchange
transactions only with(a) specified banks;
(b) public entities;
(c) foreign central banks~ foreign banks, or foreign
financial institutions;
(d) foreign governments or agencies of foreign governments;
(e) international financial institutions;
(f) any other person or body of persons whom the
Minister, on the recommendation of the Bank, may.
by notice in the Gazette, prescribe for the purposes
of this section.
Relations with
foreign centra]
banks, foreign
banks and
foreign financial
institutions.
29. The Bank may open accounts for and accept
deposits from, collect money and other monetary claims for
and on account of, foreign central banks, foreign banks and
foreign financial institutions, and may generally act as banker
to such banks or institutions.
Exchange
control.
30. The Bank shall ad'minister any law relating to
exchange control that may be in force at any time in Kenya.
Payments
agreements.
31. The Bank shall administer any payments agreement entered into by Kenya. and the Bank shall be consulted
by the Government in negotiating any payments agreement.
Fiscal agent for
Government's
transactions
with
international
financial
institutions.
Depository .
32. The Bank shall be the fiscal agent for all of the
Government's transactions with international financial
institutions of which Kenya is a member or with which
Kenya is associated.
33. The Bank shall act as depository for Kenya
currency holdings owned by international financial institu~
tions of which Kenya is a member or with which Kenya is
associated.
PART VII-RELATIONS WITH SPECIFIED BANKS
Banker to
specified
banks.
34. (1) The Bank shall open accounts for and accept
deposits from. collect money and other monetary claims for
and on account of. specified banks. and generally act as
banker to specified banks.
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Central Bank of Kenya
(2) The Bank may provide any additional services or
facilities that it considers desirable including inter-bank
clearings (0 specified banks operating in Kenya.
35. The Bank may purchase from~ seU to and rediscount
on behalf of specified banks. bills of exchange, promissory
notes and other credit instruments, bearing at least two
good signatures. the last being the endorsement of a specified
bank, maturing within one hundred and eighty days from the
date of rediscount or acquisition by the Bank. and issued or
made for the purpose of financing(a) the importation or exportation of goods. or the
transportation of goods within Kenya;
(b) the storage of nonperishable goods and products
which are duly insured or deposited under conditions
assuring their preservation in authorized warehouses or in other places approved by the Bank;
(c) industrial or agricultural production:
Provided that, if the Bank finds it to be in
the interest of the national economy. the Bank may
from time to time declare acceptable for the
purposes of this paragraph instruments relating to
industrial or agricultural production maturing
within two hundred and seventy days; and
Provided further that the Bank may require
-the credit instruments accepted by it under :the
provisions of this paragraph to be secured by a
pledge. hypothecation or assignment of the related
products or crops.
36. The Bank may grant loans or advances for fixed
periods not exceeding six months to specified banks which
pledge the following as security for such loans or advances(a) the credit instruments referred to in section 35 of this
Act; or
(b) negotiable securities issued or guaranteed by the
Government. subject to the specifications and
limitations provided for in sections 47. 48 and 49
of this Act.
37. Subject to the provisions of sections 35 and 36 of
this Act. the Bank may determine the general terms and
conditions under which it extends credit. to specified banks.
and in particular. the Bank shall determine and announce
Rediscounts_
Loans.
Conditions
for credit
transactions.
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No. 15
Central Bank of Kenya
1966
the rates of interest it will charge for rediscounting
instruments. in accordance with section 35 of this Act, and
granting loans or advances to specified banks in accordance
with section 36 of this Act. The Bank may determine
different rates for different classes of transactions or
maturities.
Reserve
requirements.
38. 0) The Bank may, from time to time, require
specified banks to maintain minimum cash balances on
deposit with the Bank as reserves against their deposit and
other liabilities:
Provided that such balances shall not exceed twenty per
cent of each specified bank's total liabilities.
(2) Subject to the limit specified in subsection (1) of
this section. the Bank may specify different ratios for different
types of liabilities and may further specify the method of
computing the amount of the total liabilities of a specified
bank:
Provided that the ratios specified shall be the same for
all specified banks.
(3) Any specification of. or increase in, the minimum
reserve requirements under subsection (I) or subsection (2)
of this section shall take effect only after the expiration of
thirty days' notice to the specified banks of the Bank's
intention to take such action.
(4) The Bank may impose on any specified bank which
fails to maintain sufficient minimum cash balances required
under subsection (1) or subsection (2) of this section a
penalty interest charge not exceeding one-tenth of one per
cent per day on the amount of the deficiency for each day for
which the deficiency continues.
(5) The Bank may, if in its opinion circumstances of
an unusual nature render it desirable so to do, pay interest
at such rates and subject to such qualifications as it may
determine on minimum cash balances deposited with the
Bank in accordance with this section.
Regulation of
interest rates of
specified banks
or specified
financial
institutions.
39. The Bank may, from time to time, determine and
publish the maximum rates of interest which specified ba nks
or specified financial institutions may pay on deposits:
Provided that the Ban k may determine different rates of
interest-
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Central Bank of Kenya
1966
No. 15
for different types of deposits; and
(ii) for different types of specified financial institutions.
(i)
40. 0) The Bank may issue instructions specifying in
respect of any loans, advances or investments made by
specified banks-(a) the purposes for which they mayor may not be
granted;
(b) the maximum maturities or, in the case of loans and
advances. the type and minimum amount of security
which shall be required~ and in the case of letters
of credit, the minimum amount of margin deposit;
or
(c) the limits for any particular categories of loans,
advances or investments or for their total amount
outstanding.
(2) Instructions issued under this section shall not have
retrospective effect, shall apply uniformly to all specified
banks engaging in the credit transactions covered by the
instructions, and shall, together with their effective dates, be
published in the Gazette.
Credit controls
over specified
banks.
41. (I) The Bank may issue instructions designed to
control the volume, terms and conditions of credit, including
instalment facilities, in the form of loans. advances or investments, extended by specified financial institutions.
(2) Instructions issued under this section shall not have
retrospective effect, shall apply uniformly to all specified
financial institutions engaged in any credit transactions
covered by the instructions and shall, together with their
effective dates, be published in the Gazette.
Credit controls
over specified
financial
institutions.
41. Whenever under any law relating to banking for
the time being in force, an application for a licence 'to transact banking business is to be granted or refused. the power
to issue licences or to exempt from the necessity to obtain a
licence shall only be exercised with the concurrence of the
Bank.
Bank to be
consulted in
licensing, etc.,
of banking
businesses.
43. (I) Every specified bank and specified financial institution shall furnish to the Bank, at .such time and in such
manner as the Bank may prescribe, all such information and
data as the Bank may' reasonably require' for the proper dis.
charge of its funCtions under this' Act:
Information to
be furnished
by specified
banks, etc.
158
No. 15
Central Bank of Kenya
1966
(2) The Bank may publish in whole or in part, at such
times and in such manner as it may decide, any information
or data furnished under this section:
Provided that no such infonnation shall be published
which would disclose the financial affairs of any person or
undertaking unless the prior consent in writing of such person
or undertaking has first been obtained by the Bank.
PART VIII-RELATIONS WITH PUBLIC ENTITIES
Fiscal agent
and banker to
public entities.
44. (1) The Bank shall act as fiscal agent of and banker
to the Government.
(2) The Bank may also perfonn the functions of fiscal
agent and banker for any other public entity in accordance
with. and within the scope determined by. any special arrangements made between the Bank and the public entity concerned.
FUDctions
as fiscal
agent.
45. The Bank in its capacity as fiscal agent and banker
to any public entity shall, subject to the instructions of that
public entity, have power(a)
to be the official depository of the public entity concerned and accept deposits and effect payments for
the account of that public entity:
Provided that the Bank may. after consultation
with the Minister. select any specified bank to act in
its name and for its account as the official depository
of that public entity in places where the Bank has
no office or branch;
(b)
to maintain and operate special official accounts in
accordance with arrangements made between the
Bank and the public entity concerned;
(c) as
an agent of the Government, to adminiSlter the
public debt mcluding rthe issuance of. payment of
interest on, and redemption of. bonds and other
securi ties of the Government:
(d)
to pay, remit, collect or accept for deposit or custody
funds ,in Kenya or abroad;
(e) to purchase, sell~ ,transfer or accept for custody
cheques, bills of. exchange andseciIrities;
159
1966
Central Bank of Kenya
No. 15
(f) to collect the proceeds, whether principal or interest,
resulting from the sale for, or accruing to the interest
of, a public entity of securities or other property;
(g) to purchase, sell. transfer or accept for custody gold or
foreign exchange.
46. 0) The Bank may make direct advances to the
Government.
Direct
advances to the
Government.
(2) Advances made under 'this section sball bear interest
at such rate as may be detennined by the Bank with the consent of the Minister, but in no event shall such rate be less
than three per cent per annum.
47. The Bank: may purchase, hold or sell negotiable
securities of any maturity issued by the Government, or issued
by any other public entity and guaranteed by the Government.
The aggregate of(a) the Bank's direct advances to the Government under
the authority of section 46 of this Act;
(b) the value of securities owned by the Bank in accordance with section 47 of this Act; and
(c) the value of securities held by the Bank as security in
accordance with section 36 (b) of this Act,
41.
Credit
operations with
Government
securities.
Umiton
lending to tbe
Government.
shall not at anyone time exceed two hundred and forty million
shillings:
Provided that of this amount the value of securities which
mature later than twelve months from the date of acquisition
or acceptance as security by the Bank shall not at anyone
time exceed sixty million shillings.
49. Except as provided in accordance with sections
36 (b),. 46, 47 and 48 of this Act the Bank shall not extend
any credit directly or indirectly to any public entity.
Probibition of
other credit
to public
entities.
50. (I) It shall be the duty of the Bank to advise the
Minister on any matter which in its opinion is likely to affect
the achievement of the principal objects of the Bank as spedfi ed in section 4 of this Act.
Adviser to tbe
Government.
(2) The Bank may tender advice to the Minister on any
matter in which the Bank is concerned.
160
No. 15
Central Bank of Kenya
1966
(3) The Minister may request the Bank to give its advice
on any particular measures, situations or transactions. or on
monetary. banking and credit conditions in or outside Kenya.
and the Bank shall give its advice accordingly.
PART IX-MISCELLANEOUS PROVISIONS
Revaluation
profits.
Prohibited
operations.
51. (1) Profits or losses which are attributable to any
revaluation of the Bank's net assets or liabilities in gold,
foreign exchange or foreign securities made as a result of any
change in the par value of any currency unit shall be excluded
from the computation of the annual profits and losses of the
Bank.
(2) All profits or losses so excluded shall be transferred
to a special account to be called the Revaluation Account.
52. The Bank shall not(a) save as expressly authorized by this Act, engage in
trade, or own or acquire any direct interest in any
commercial. agricultural. industrial or similar undertaking, except in the course of obtaining satisfaction
for any debt due to the Bank. provided that any
such interest shall be disposed of at the earliest
suitable opportunity;
(b) purchase, acquire or lease immovable property for
commercial purposes or as an investment except for
rits own business requirements or for the use of its
employees;
(c) draw or accept bills payable otherwise than on
demand; or
(d) guarantee any loan, advance or investment.
Financial
53. The financial year of the Bank shall be the same
as 'the Government's financial year and the accounts of the
Bank shall be closed at the end of each financial year.
Annual
reports.
54. Within three months after the close of each financial
year the Bank shall submit to the Minister a report on the
Bank's operations throughout tha't year. together with the
balance sheet and the profit and loss account as certified by
auditors appointed by the Bank and approved by the Minister.
Publication of
reports, etc.
55. (I) After submission to the Minister 'the Bank shall
publish the annual report referred to in section 54 of this
Act.
year.
161
1966
Central Bank of Kenya
No. 15
(2) The Bank may also issue such other publications as
it considers to be in the pu blic interest.
56. The Minister may, in addition to the audit carried
out under section 54 of this Act, if he thinks fit, require the
Controller and Auditor-General to audit the accounts of the
Bank.
Audit by
Controller and
Auditor-General.
57. The written laws specified in the first column of the
Schedule to this Act are hereby amended. in relation to the
provisions specified in the second column, in the manner
respectively specified in the third column of the said Schedule.
Amendment
of laws.
PART X-TRANSITIONAL PROVISIONS
58. (1) The Currency Notes Act, and the Kenya and
Uganda (Currency) Order, 1921, in so far as they apply to
Kenya, are hereby repealed.
Repea.L
~~~:ll7.o.i.c.
(2) The East African Currency Board Regulations, 1955.
in so far as they apply to Kenya, may be repealed by the
Minister. by notice in the Gazette, in whole or in part, as
and when he considers necessary.
59. Kenya·s share of the assets of the East African
Currency Board shall be transferred to the Bank as and when
those assets become available and the Bank shall have the
sole right to receive those assets.
Taking over
assets of
East African
Currency
Board.
60. Any Kenya securities or their equivalent on oonversion received by the Bank as part of Kenya's share of the
assets of the East African Currency Board shall not be deemed
to be credits to the Government for the purposes of computing
the limits on credit specified in section 48 of this Act.
Exclu&iDn of
fiduciary issue
from the limit.s
on Government
credit.
61. Upon the coming into operation of this Act, any
act done and preliminary expenses incurred by the Government in connexion with the formation of the Bank, including
the printing of notes and minting of coins to be issued by the
Bank, 'shall, as the Minister may direct, have the same effect
and validity as if such acts had been validly done and such
expenses validly incurred by the Bank; and the Bank may
continue any act so commenced but remaining unfinished at
the date of the coming into force of this Act as if such act
had been initiated by the Bank.
Preliminary
acts and
expenses.
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1966
(s. 57)
SCHEDULE
Provision
Amendment
The Interpretation
and General Provi4
sions Act (Cap. 2).
s. 3
Insert in its proper alphabetical sequence the
following definition-
The Penal Code
(Cap. 63).
s. 364
Written Law
"shilling" (or its abbreviated form "Sh.") means
the Kenya shilling (or its abbreviated form
"K.Sh. "), or a shilling issued by the East African
Currency Board for so long as it remains legal
tender in Kenya in accordance with the provisions
of the Central Bank of Kenya Act, 1966.
Substitute for the definition of "coin" the following new definition"coin" includes any coin which is legal tender in
Kenya in accordance with the provisions of the
Central Bank of Kenya Act, 1966, and any coin of
a foreign Sovereign or State.
Insert immediately after section 367 the following
new sectionMutilating
currency
notes.
367 A. Any person who wilfully defaces, tears, cuts or otherwise mutilates
any currency note shall be guilty of an
offence and shall be liable to imprisonment for a period not ~xceeding three
months or to a fine not exceeding two
thousand shillings, or to both such
imprisonment and fine.